Portfolio Analysis

A company’s portfolio is the sum of its business, assets and products. A perfect portfolio analysis is shaped to meet and suit the company’s potency and also enable it to exploit the best opportunities available to it. Analysis of a portfolio involves deciding on the relative importance of available business and investment opportunities.
This analysis also involves formulating strategies that would add to the portfolio in terms of new business opportunities and products. The best portfolio analysis takes into account the locations of the different Strategic Business Units (SBU) present in the portfolio. These SBU’s have business objectives and missions independent of the other business objectives of the company.

SBU’s can be:
Individual brands
Product lines
Company divisions

The basic postulates that are involved in portfolio analysis are common to all companies. Determining market attractiveness may be the most important part of portfolio analysis.

The following are the ways to determine market attractiveness:
Market growth
Market size
Market profitability
Intensity of competition in the market
Pricing trends
Segmentation
The risks involved in returns in industry
The distribution structure; that is, wholesale, retail or direct
Available opportunities for differentiating between products and services

Accessing competitive strength of the company is also another important strategy of portfolio analysis.

The following points must be considered while analyzing a portfolio:
Market share
Relative brand strength
Distribution strength
Loyalties of customers
The extent of the company’s access to investment and financial opportunities
Relative cost position
Records of technological innovations

When it comes to portfolio planning methods, the two most popular are:
Boston Consulting Group Portfolio Matrix
McKinsey / General Electric Matrix

A portfolio analysis helps optimize investments and locates relatively productive business opportunities. The tools of portfolio analysis help to maintain a balance in the portfolio. Through the analysis, performance of the company over a period of time can be evaluated; thus, plans for the future can be formulated.
A portfolio analysis helps optimize investments and locates relatively productive business opportunities. The tools of portfolio analysis help to maintain a balance in the portfolio. Through the analysis, performance of the company over a period of time can be evaluated; thus, plans for the future can be formulated.

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Last Updated on : 8th July 2013

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